9911796707
TMI Blog2012 (10) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... endors, a detenu, who was covered by Section 2(2)(b), was issued notice way back on 8.12.2003 under Section 6(1) of SAFEMA. The other vendor, wife of the detenu, was also issued notice under Section 6(1) in 2004 once it transpired that she held 50% share in the said flat. Both vendors were served with notices under Section 6(1) before transaction of sale in favour of the appellants. After the issuance of notices under Section 6(1) of SAFEMA to the vendors, the transaction of sale in favour of the appellants has to be ignored by virtue of Section 11 and on passing of the order of forfeiture under Section 7, the sale in favour of the appellants had become null and void. The order of forfeiture dated 23.06.2005 under Section 7 of SAFEMA relates back to the issuance of first notice under Section 6(1) to one of the vendors. In respect of a transfer after issuance of notice under Section 6, the property referred to therein, the holder cannot set up plea that he is a transferee in good faith or a bona fide purchaser for adequate consideration. Such plea is not available to a transferee who has purchased the property during pendency of forfeiture proceedings - the protection given to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of subject flat was issued to Mohd. Ismail Shabandari. SAFEMA was applicable to him as he was a 'person' within the meaning of Section 2(2)(b) of SAFEMA. The Competent Authority having come to know that his wife, Fathima Kauser Ismail, was having 50 per cent share in the subject property, a notice under Section 6(1) was also issued to her as she happened to be 'relative' within the meaning of Section 2(2)(c) of SAFEMA. The above notices were served on them. 5. In response to the notice issued to him under Section 6(1), Mohd. Ismail Shabandari sent a letter to the Competent Authority on 26.5.2004 stating therein that the subject flat was purchased through legal earnings. By a subsequent letter, he stated that he had explained the sources of acquisition before the income tax authorities. He filed copies of the income tax returns and also stated that his wife Fathima Kauser Ismail received remittances from her brother in 1994. Mohd. Ismail Shabandari was asked by the Competent Authority to substantiate his claim in respect of sources from which he and his wife purchased the property. He and his wife were asked to appear personally but they did not appear and it transpired that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 11 of SAFEMA. A copy of this order was sent by the Competent Auhority to the present appellants. 9. It was then that the appellants filed a writ petition before the Karnataka High Court for quashing the order dated 23.6.2005 forfeiting the subject flat and for writ of mandamus to the Competent Authority not to interfere with their peaceful possession and enjoyment in respect of the subject flat. The above reliefs were sought on diverse grounds, including that they had purchased the subject flat after thorough verification and after obtaining encumbrance certificates for the period from 1.4.1990 to 4.1.2005 and after satisfying with the title of the vendors and also that there was no charge or encumbrance created over the subject flat. They claimed that they were bona fide purchasers for adequate consideration. 10. A counter affidavit was filed by the Competent Authority in opposition to the writ petition. The appellants filed rejoinder to the counter affidavit. 11. The learned Single Judge of the High Court heard the parties and considered the question that was raised before him as to whether the appellants (petitioners therein) were entitled to a notice from the Competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferors which prima facie establishes that the appellants are transferees in good faith for adequate consideration. Learned senior counsel contended that the appellants were seeking an opportunity to be given to them to prove before the Competent Authority that they were transferees in good faith for adequate consideration and that is what was done by the Single Judge and there was no justification for the Division Bench to upset such a just order. 14. On the other hand, Mr. A.S. Chandhiok, Additional Solicitor General, would submit that the purchase of the subject flat by the appellants was after the issuance of notice under Section 6(1) to the vendors by the Competent Authority. SAFEMA is applicable to one of the vendors by virtue of Section 2(2)(b) and to the other vendor by virtue of Section 2(2)(c). He argued that transaction of sale was null and void under Section 11 and the appellants are not covered by the excepted category of the 'holder' under Section 2(2)(e). He placed reliance upon a decision of this Court in Aamenabai Tayebaly and Others v. Competent Authority under SAFEMA and others[2] and a decision of Madras High Court in Competent Authority v. Parvathi Bai[3]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any income, earnings or assets the source of which cannot be proved and which cannot be shown to be attributable to any act or thing done in respect of any matter in relation to which Parliament has no power to make laws; or (iv) any property acquired by such person, whether before or after commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property referred to in sub-clauses (i) to (iii) or the income or earnings from such property ; and includes- (A) any property held by such person which would have been, in relation to any previous holder thereof, illegally acquired property under this clause if such previous holder had not ceased to hold it, unless such person or any other person who held the property at any time after such previous holder or, where there are two or more such previous holders, the last of such previous holders is or was a transferee in good faith for adequate consideration; (B) any property acquired by such person, whether before or after the commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property falling under item (A), or the income or earnings th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted (and in a case where the person affected holds any property specified in the notice through any other person, to such other person also) a reasonable opportunity of being heard, by order, record a finding whether all or any of the properties in question are illegally acquired properties. (2) Where the competent authority is satisfied that some of the properties referred to in the show-cause notice are illegally acquired properties but is not able to identity specifically such properties, then, it shall be lawful for the competent authority to specify the properties which, to the best of its judgment, are illegally acquired properties and record a finding accordingly under sub-section(1). (3) Where the competent authority records a finding under this section to the effect that any property is illegally acquired property, it shall declare that such property shall, subject to the provisions of this Act, stand forfeited to the Central Government free from all encumbrances. (4) Where any shares in a company stand forfeited to the Central Government under this Act, then the company shall, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. The provisions of SAFEMA are stringent and drastic in nature. They are designed to discourage law breaking and directed towards forfeiture of illegally acquired properties. One of the concepts that centres around the provisions of SAFEMA is to reach properties acquired illegally by the persons who are covered by Clauses (a) to (e) of Section 2(2). The provisions of SAFEMA are intended to apply to any property acquired by persons covered by Clauses (a) to (e) of Section 2(2), whether before or after the commencement, wholly or partly out of or by means of any income, earnings or assets derived or obtained from or attributable to any activity prohibited by or under any law for the time being in force. However, SAFEMA is not applicable to holder of any property under Section 2(2)(e) who proves that he is a transferee in good faith for adequate consideration. The question that arises for consideration in this appeal is, whether appellants who purchased the subject flat during pendency of forfeiture proceedings are entitled to an opportunity to prove that they are transferees in good faith for adequate consideration. 23. In Amratlal Prajivandas1, a 9-Judge Bench of this Court ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to a transferee who has purchased illegally acquired property defined under Section 3 from a detenu/convict and/or his relative or associate after issuance of notice under Section 6 of SAFEMA. Section 2(2)(e) refers to any holder of any property, which was at any time previously held by a person referred to in clause (a) or clause (b) unless such holder proves that he is a transferee in good faith for adequate consideration. The holder talked of in Section 2(2)(e) does not cover a holder who is a transferee of the property after issuance of notice under Section 6. It is so because Section 11 makes it manifest that if any property referred to in the notice under Section 6 or under Section 10 is transferred by any mode whatsoever, such transfer shall be ignored for the purposes of proceedings under SAFEMA and if such property is subsequently forfeited under Section 7 then the transfer of such property shall be deemed to be null and void. On issuance of notice under Section 6, a moratorium is placed on transfer of property referred to in the notice. Any transfer of such property (the property referred to in Section 6 notice) is prohibited. 24. In Aamenabai Tayebaly2, this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion No. 1680 of 1977 moved by Tahira Sultana was disposed of and the subsequent Writ Petition No. 1527 of 1995 was dismissed by the High Court and the SLP filed by her in this Court was also dismissed. We may also note that as the Miscellaneous Petition No. 1680 of 1977 was withdrawn on 19-6-1995 and ultimately the forfeiture order came to be confirmed in the subsequent Writ Petition No. 1527 of 1995 on 21-8-1995, the transaction of transfer in favour of Tayab Ali would be said to have been effected after the notice under Section 6, issued to Tahira Sultana, and before the order of forfeiture ultimately got confirmed by the High Court and by this Court and which had back effect of confirming the same from 1977. It must, therefore, be held that the transaction of purchase by the appellants' predecessor Tayab Ali was also hit by Section 11 of SAFEMA. Consequently in 1981 when the purchaser purchased this property from Tahira Sultana she had no interest in the said flat which she could convey to the appellants' predecessor. In substance it amounted to selling of Central Government's property by a total stranger in favour of the purchaser. No title, therefore, in the said property pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants had obtained encumbrances certificates from the Sub-Registrar prior to purchase which show that there were no encumbrances to the subject flat. It is also true that the appellants had obtained loan from Vijaya Bank, Brigade Road Branch, Bangalore for purchase of the said flat. It is a fact that sale consideration to the tune of Rs. 26 lakhs was paid directly by the Bank to the vendors after the Bank was satisfied about the title of the vendors. The appellants had also mortgaged the flat with the Vijaya Bank as a security towards loan. But unfortunately these facts are of no help to the appellants as the sale in their favour was effected after notices under Section 6(1) were issued to the vendors. Such sale has no legal sanction. The sale is null and void on the face of Section 11; it is not protected so as to enable the purchaser to prove that he is transferee in good faith for adequate consideration. As a matter of law, no title came to be vested in the appellants by virtue of sale-deed dated 10.02.2005 as the vendors could not have transferred the property after service of the notice under Section 6(1) and during pendency of forfeiture proceedings under SAFEMA. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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